Why exit plans matter to Boomer Business Owners (BBO’s)

In the next 10 years it is estimated that $10 trillion in Canada, will change hands as a result of small and medium size businesses being sold, handed down to the next generation, merged, or simply closed down. One estimate is that 800,000 Canadian businesses will change hands due to boomers retiring.

In many cases BBO’s (you heard it here first) have invested their lives in their businesses, along with financial sacrifices and investments. In exiting the business, isn’t it worth getting the maximum return on all that investment?

It behooves everyone, really, to have an exit plan. It’s not so much when we retire from the business, it’s what we retire with.

Some more observations;

Less than 40% of BBO’s have sufficient funds with which to retire.

Many owners are relying on their business to fund their retirement, but doing nothing to the business to realize this.

20% or so of BBO’s have an Exit plan.

There is a big difference between the Personal financial and legal aspects of retirement or exit planning, and getting the Business ready for exit.

For BBO’s the personal retirement planning, finances management and investments, the personal tax, legal, trusts, and all related aspects are handled by qualified experts and professionals in those fields.

What we do is focus on the Business itself by specializing in staging a business to maximize its value on the Owner’s retirement.

Businesses have transitional phases

At Plutus Consulting Group we understand that all businesses transition over time, developing and displaying different characteristics at different stage of the business life cycle. An early

stage business looks and behaves very differently to a 5 or 10 year old business that may be at Stage 3 or 4.

This is important because their valuations will be very different, depending on a number of criteria, including financial results over time, a strong balance sheet, quality of sales to a regular customer base, Internal structures and processes, people quality and Organization structure, a balanced executive team, brand recognition and business differentiation in the market, competition in the market, and many more other aspects.

There is a direct correlation between the development of the business, and its valuation.

We do know from research done in over 10 countries that some businesses get stuck in the early stages, and will not have much value when the owner retires( expressed as a multiple of EBITDA, or Sales, or some combinations of metrics).

It is critical that BBO’s in early stage companies, in fact all business that are not at least stage 5, develop an Exit plan that will increase business value.

Plutus Consulting uses two diagnostic tools that do the following:

Identifies at what stage the business is at present

Helps you develop a plan for maximizing the business value.

We identify what is needed to maximize the value of the business, and how to do it.

A critical aspect of Exit planning is in the execution. To help make this a success, we work with you in the process, assisting in the implementation of the value-added initiatives that will increase your payout when you sell.

BBO’s are at a critical moment. At some stage we all have to retire, and we all want to spend summers in a warmer place, or travelling, or just taking it easy.

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Our Approach

Our approach is to remain with our clients as they wrestle with the kinds of issues that inevitably arise ; just having us or somebody like us there as a sounding board helps them clarify their direction. But the real benefit our clients gain is that we are there to help guide them through the implementation of the projects that they have undertaken. Especially helping to react to whatever obstacles that inevitably surface along the way.